Comcast Fights Ownership Limits

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With phone companies entering cable markets and consumers surfeited with video from iPods and Internet sites like YouTube, Comcast is advocating that federal cable-ownership limits are both unnecessary and judicially unsustainable.

As the largest U.S. cable company, Comcast is the only cable operator that has to worry that a transaction involving a few million cable subscribers could bump into cable ownership caps enforced by the Federal Communications Commission.

On an informal basis, the FCC won’t allow a cable company to serve more than 30% of pay TV subscribers. With 26.2 million subscribers, Comcast has 27% of the 96.8 million subscribers to pay television, the multiple-system operator said last Thursday, citing Kagan Research data.

Implementing a 1992 law, the FCC has designed cable-ownership rules based on concerns that a few giant cable companies would hold too much power over programmers seeking distribution. But in a Feb. 14 filing, Comcast insisted that because of “revolutionary changes in the marketplace,” market forces rather than anticompetitive motives dictate the programming decisions of cable operators.

“It is clear that no cable operator has either the incentive or the ability to effectuate the harm at which the statute was aimed: obstructing the flow of video programming to the consumer,” Comcast explained to the FCC in a filing prepared by lawyers expert in regulatory and constitutional law.

More than a decade ago, the FCC said that no cable operator could own systems that pass more than 30% of cable homes.

In the late 1990s, the FCC abandoned the homes-passed test. Reflecting the success of satellite-television providers, the FCC adopted a new limit that stopped a cable operator from growing above 30% of pay-TV subscribers.

But a federal appeals court in March 2001 tossed out the 30% subscriber cap and returned the matter to the FCC for further review. Since then, the FCC hasn’t issued any new rules. Instead, it has enforced the 30% cap in cable mergers. Comcast, for example, had to divest a minority stake in Time Warner Entertainment, which reduced its cable subscriber count from 41% to 28.9%, in order to merge with AT&T Broadband.

“The commission has often used the merger process to impose conditions on one company,” noted telecommunications analyst Randolph May, president of the Free State Foundation, a free-market think tank based in Potomac, Md.

In recent weeks, FCC chairman Kevin Martin has expressed interest in reviving the cable-ownership issue, either as a standalone matter or as part of the broader media-ownership debate.

Andrew Schwartzman, president of the public-interest law firm Media Access Project, said that the FCC should keep cable ownership on a separate track.

MAP played an important role in scuttling in court the relaxed TV-station, radio-station and newspaper ownership rules adopted by the FCC in 2003.

“Mucking them up together is just going to delay both of them,” Schwartzman said. “At this stage of the game, I’m against it just on the grounds of delay.”

In its filing, Comcast told the commission that the revival of a cable subscriber cap would violate the First Amendment because it would limit cable speech based on the faulty premise that cable operators are positioned to inflict economic harm on programmers.

May said that cable faced sufficient competition to justify a cap-free system supported by Comcast.

“My view is that in today’s environment, there should not be a limit and the commission should eliminate the cap,” May said.

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